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HomeMy WebLinkAbout10.03.22 Work Session Packet CITY OF Meeting Location: FARMINGTONFarmington City Hall 430 Third Street Farmington, MN 55024 CITY COUNCIL WORK SESSION MEETING AGENDA October 3, 2022 5:00 PM 1. CALL TO ORDER 2. APPROVE AGENDA 3. DISCUSSION ITEMS (a) Future Debt-(60 minutes) 4. CITY ADMINISTRATOR UPDATE S. ADJOURN CITY OF O 43o Third St., Farmington, MN 55024 FARMINGTON © 651-28o-6800 FarmingtonMN,gov TO: Mayor, Councilmembers and City Administrator FROM: Chris Regis, Finance Director SUBJECT: Future Debt-(60 minutes) DATE: October 3, 2022 INTRODUCTION The city has several capital projects in its future that will be required to be financed through the issuance of debt. DISCUSSION The current debt service tax levy for 2023 is$2,069,565. With the possibility of an expansion of the Public Safety facility, street reconstruction projects out to 2027, and recreation capital projects this number will increase. Staff will present two scenarios of the potential impacts of new debt on future tax levies. Both scenarios reflect increases in the debt service tax levy. BUDGET IMPACT The issuance of debt to fund future capital projects will have the effect to increase future tax levies and impact the level of taxes that residents pay. ACTION REQUESTED No action is requested at this time. What has been presented is to give the council a view of how the city's debt service levy will be affected by the issuance of new debt. Notes • Present two scenarios — A & B • Scenario A - Public Safety Bond — Par Amount $11,825,000 • $1,800,000 of ARPA and Solid Waste Funds used to reduce bond. • Realize lower interest cost and total debt service over the life of the bond. • 20 year term issue date 2023 • Scenario B Public Safety Bond — Par Amount $13,675,000 • ARPA and Solid Waste Funds used to reduce debt service levies. • $600,000 per year for three years. • Realize higher interest cost and total debt service over the life of the bond. • 20 year term issue date 2023 • Park Improvement Bonds • Par amount of bonds $12,450,000 • 20 year term issue date 2024 • Street Projects 2023-2027 • Total par amount of bonds $14,180,000 • 10 year terms SCENARIOS FOR NEW DEBT ISSUANCE Scenario A Public Safety Expansion: Debt structured with 20 year term and level annual payments,use of$1.8 million of cash to reduce bonding All Other Debt Structured with 10 year terms and level annual debt payments Public Safety Street Projects Street Projects Street Projects Street Projects Street Projects Park Total Expansion 2023 2024 2025 2026 2027 Improvements Par Amount of New Bonds $11,825,000 $3,755,000 $2,330,000 $1,905,000 $2,305,000 $3,885,000 $12,450,000 $38,455,000 Issuance Year 2023 2023 2024 2025 2026 2027 2024 Term of Bonds 20 10 10 10 10 10 20 Scenario B Public Safety Expansion: Debt structured with 20 year term with level annual payments and use of$1.8 million of cash to reduce debt service levies ($600,000/yr between 2024-2026) All Other Debt Structured with 10 year terms and level annual debt payments Public Safety Street Projects Street Projects Street Projects Street Projects Street Projects Park Total Expansion 2023 2024 2025 2026 2027 Improvements Par Amount of New Bonds $13,675,000 $3,755,000 $2,330,000 $1,905,000 $2,305,000 $3,885,000 $12,450,000 $40,305,000 Issuance Year 2023 2023 2024 2025 2026 2027 2024 Term of Bonds 20 10 10 10 10 10 20 New Debt Issuance General Obligation Bonds Scenario A Scenario B $20.0 $18.0 $16.0 $14.0 $12.0 0 $10.0 $8.0 $6.0 $4.0 $2.0 gy $0.0 o: 2023 2024 2025 2026 2027 2028 Scenario A General Obligation Bond Issuance Public Safety Expansion Street Projects 2023 Park Improvements ■Street Projects 2024 ■Street Projects 2025 Street Projects 2026 ■Street Projects 2027 $20.0 $18.0 $16.0 $14.0 ' $12.0 0 $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 2023 2024 2025 2026 2027 Scenario B General Obligation Bond Issuance Public Safety Expansion Street Projects 2023 Park Improvements ■Street Projects 2024 ■Street Projects 2025 0 Street Projects 2026 ■Street Projects 2027 $20.0 $18.0 $16.0 $14.0 $12.0 c 0 $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 - 2023 2024 2025 2026 2027 General Obligation Bonds Outstanding ■ Existing Debt Only- No New Debt Issuance ■Scenario A- Existing Debt Plus New Debt Issuance Scenario B- Existing Debt Plus New Debt Issuance $40(, $35.0 $30.0 c o_ $25.0 $20.0 $15.0 $10.0 $5.0 r E IL $0.0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 Debt Service Tax Levies s Existing Debt Only- No New Debt Issuance ■Scenario A- Existing Debt Plus New Debt Issuance ■Scenario B - Existing Debt Plus New Debt Issuance $6.0 $5.0 $4.0 c 0 $3.0 $2.0 $1.0 $0.0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 CITY TAXES PAID BY $350,000 RESIDENTIAL HOME THAT IS FOR FOR DEBT SERVICE ON CITY BONDS (INCLUSIVE OF EXISTING AND PLANNED NEW DEBT) Existing Debt Only- No New Debt Issuance ■Scenario A 77 Scenario B i $100 ! !f $0 I 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 TAX IMPACT ON $ 350, 000 RESIDENTIAL HOMESTEAD PROPERTY Public Safety Park SCENARIO FOR NEW Expansion Street Projects Street Projects Street Projects Street Projects Street Projects Improvements BONDING 2023 2023 2024 2025 2026 2027 2024 Scenario A Par Amount of Bonds $11,825,000 $3,755,000 $2,330,000 $1,905,000 $2,305,000 $3,885,000 $12,450,000 Debt Service Levy for Bonds(Average Annual) $947,507 $477,437 $298,287 $242,514 $294,988 $499,528 $1,003,764 Scenario B Par Amount of Bonds $13,675,000 Debt Service Levy for Bonds(Average Annual) $1,005,596 Scenario A: Residential Homestead $109 $55 $34 $28 $34 $57 $115 Scenario B: Residential Homestead $126 $55 $34 $28 $34 $57 $115 Tax impact equals the equivalent one-time increase in city taxes to provide the increase in revenue from debt service levy for the duration of the bonds issued to finance the respective project as shown. All amounts are estimated. O U N 0 N O 4-J